Grayscale Exudes Optimism on Ethereum ETF Approval Amidst Lingering SEC Concerns

Grayscale Investments remains optimistic about the SEC's approval of spot Ethereum ETFs in May, citing the precedence set by spot Bitcoin ETF approvals. However, Bloomberg analysts have expressed concerns about the SEC's lack of engagement with applicants, reducing their odds of approval to 25%. Grayscale's Chief Legal Officer counters this skepticism by emphasizing the strong correlation between futures and spot products and the recent approval of Ether Futures ETFs.

Grayscale Exudes Optimism on Ethereum ETF Approval, but Concerns Linger

Lucknow, India (CoinChapter.com) - Grayscale Investments, a preeminent New York-based investment management firm, expresses unwavering confidence in the imminent regulatory approval of spot Ethereum (ETH) exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) in May. However, recent concerns have been raised regarding the SEC's perceived lack of engagement with applicants, casting a shadow over the potential outcome.

Craig Salm, Grayscale's esteemed Chief Legal Officer, steadfastly believes in the imminent approval of the ETFs. In a March 25 Twitter post, he unequivocally stated: "I personally am not deterred by it and believe the ETFs should be approved."

Salm's optimism is anchored in the premise that many of the issues typically associated with spot Ether ETFs were meticulously addressed during the approval process for spot Bitcoin ETFs. He elucidated that critical details concerning creation and redemption procedures, cash and in-kind models, asset protection, loss prevention, and custody "were figured out" during the Bitcoin ETF applications.

"So in many ways, the SEC already has engaged, and issuers simply have less to engage on this time," Salm asserted, emphasizing that "the case is just as strong as it was for spot #Bitcoin ETFs."

Nevertheless, Salm acknowledged that ETF issuers seeking to incorporate staking into their spot Ether ETFs might encounter an additional hurdle that requires further deliberation with the SEC. This category includes prominent applicants such as Ark 21Shares, Fidelity, and Franklin Templeton.

Bloomberg Analysts Sound Alarm on Ethereum ETFs

Despite Grayscale's unwavering confidence, Bloomberg ETF analysts Eric Balchunas and James Seyffart recently expressed apprehension over the SEC's apparent "lack of engagement." Subsequently, they have downgraded their forecast for an approved spot Ether ETF in May to a "pessimistic 25%."

Balchunas posits that the SEC's lack of engagement appears "purposeful" rather than mere "procrastination."

Salm countered this skepticism by drawing attention to the recent approval of Ether Futures ETFs and their regulation as commodity futures. He contends that this development places the spot Ether ETFs in a strong position for approval, given the "high correlation" between futures and spot products.

Furthermore, Coinbase's Chief Legal Officer, Paul Grewal, and Brian Quintenz, a former commissioner of the Commodity Futures Trading Commission, expressed similar sentiments last week.

Optimism vs. Skepticism

However, there are compelling reasons to approach Grayscale's overconfidence with skepticism. To date, the SEC has not approved any spot crypto ETF beyond Bitcoin. Therefore, an Ethereum approval would represent an unprecedented step into a hitherto uncharted territory of crypto regulation.

Moreover, SEC Chair Gary Gensler's recent comments questioning whether Ethereum's shift to proof-of-stake might violate the Howey test for investment contract securities have further cast doubt on the prospects of approval.

Ultimately, while Grayscale presents logical arguments based on the approval trajectory for Bitcoin ETFs, their optimism may be excessive. The SEC has consistently maintained a highly cautious stance on crypto. Consequently, approving a spot Ethereum ETF amidst ongoing regulatory ambiguity would constitute a bold departure from this established approach.

The SEC is expected to make a decision on VanEck's application by May 23. Analysts anticipate that all applicants will be notified of their respective fates on that date.